.
By Petros Florides
Albert Einstein defined insanity as doing the same things over and over but expecting different results. When it comes to corporate governance, Cypriots have a choice to make. Do we certify ourselves insane by continuing with the same philosophy and practices that led to the mass destruction of wealth and loss of opportunity on this island – or do we pursue the sane course of action by doing things differently.
Einstein also said a problem cannot be solved from the same consciousness that created it. Decades of bad governance, both in the public and private sector, have left the country vulnerable to both internal and external slow-onset crises (e.g. unsustainable government debt, sovereign bond crisis) and internal and external shocks (e.g. Mari, global financial crisis). If Einstein was right, the only way out of a crisis initiated by bad governance is to base a recovery on good governance.
Corporate governance, together with its complement risk management, has received a lot of attention in recent years. Alas, it has been paid only lip service in Cyprus, as is evident from the damning interim report issued by the Independent Commission on the Future of the Banking Sector in Cyprus. It states: “The failure of corporate governance was one of the most important reasons why Cyprus’ biggest banks brought disaster upon themselves.” This same diagnosis could also be made of the State.
With Cyprus’ unenviable expertise in the fields of: ‘boom & bust industry’ (e.g. stock market, property, banking), slow-onset bankruptcy (e.g. Cyprus Airways, EuroCypria), and catastrophe with human tragedy (e.g. Helios, Mari), the only logical conclusion for a Cypriot committed to a better future is that ‘the way we do things around here’ must change.
To this end, a new initiative is being promoted under the working title “New Governance for a New Cyprus”. The vision of this initiative is to chart a different path for Cyprus’ future through exemplary governance that will restore Cyprus’ battered international reputation, and restore opportunity and economic prosperity to this island.
A wide cross section of professional bodies, academia, civil society and individuals are formulating what is being referred to as a “Governance Charter”. This will contain the ethics, values and principles the Cypriot public are now demanding from those who have their hands on the levers of power in public or private entities that are considered either systemically important, “too big to fail” or of public interest. The intention is to reinforce this with new or revised laws that dictate the personal liabilities of Directors (in public as well as private organizations) under Cyprus Law, in line with similar developments in other countries. In addition, it is being proposed that the effectiveness of the voluntary “comply or explain” corporate governance regime be reviewed to take account of the Cyprus context, with greater emphasis on a “comply or else” regime if considered more effective.
Last, and by no means least, a holistic approach to good governance is being advocated, with each stakeholder group (e.g. shareholders, regulators, auditors, professional bodies, academia, media, creditors, employees, customers, civil society, general public etc.) exercising their rights, but also living up to their responsibilities, and contributing accordingly to the governance process.
Any organisation, institution or individuals interested in joining the initiative for a better Cyprus through better governance are invited to contact Petros Florides ([email protected] ).
Petros Florides is Regional Governance Advisor for World Vision International, and Executive Officer of World Vision Cyprus. Petros is also on the board of Institute Directors (Cyprus), co-founder of the Cyprus National Advisory Council for the Chartered Institute for Securities & Investments, co-founder of the Institute of Risk Management Cyprus Regional Group, and a Chartered Management Accountant. The views in this article represent those of the author and not any other individual or organisation.
